BOJ Keeps Rates Steady, Warns of Further Hikes Amid Yen Intervention

The Bank of Japan (BOJ) kept interest rates steady at 1% on Friday but warned that underlying inflation could exceed its target, signaling further rate hikes.

This decision came after the government conducted yen-buying, dollar-selling market intervention in New York markets on Thursday. However, this move failed to give the yen a sustained boost.

BOJ Governor Kazuo Ueda may need to talk down yen bears through hawkish communication, as prospects of US rate hikes weigh on the yen's value against the dollar. The economy appears to have weathered the hit from rising fuel costs and supply disruptions from the Middle East conflict, which are driving up inflation.

Separate data showed annual core inflation in Japan's capital accelerated to 1.7% in July, a sign of broadening price pressures. Most analysts polled by Reuters expect the BOJ to raise rates again to 1.25% by year-end.